Revenue from Investment for Kennett Corporation
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Kennett Corporation purchased 25,000 shares of common stock of the Swenson Corporation for $40 per share on January 2, 2008. Swenson Corporation had 100,000 shares of common stock outstanding during 2008, paid cash dividends of $60,000 during 2008, and reported net income of $200,000 for 2008. Kennett Corporation should report revenue from investment for 2008 in the amount of how much?
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Solution Summary
The solution discusses the two different methods for reporting revenue based on whether the investment is reported at cost or equity. Both include calculations.
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Investment revenue is calculated as follows:
Initial investment represents 25% of the outstanding shares of Swenson Corporation.
Kennett income = 200,000 x 25% = 50,000
Dividends are not reported as income, but are a reduction ...
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